I am very pleased and honored to have been named the 2005 Distinguished Accounting Alumnus. The years I was a student here were turbulent ones -- marked, for example, by the day that I was blocked from attending my introductory accounting class in the old Commerce Building by the Dow Chemical recruitment protest, an event described in David Maranis’s recent book, They Marched in Sunlight. Obviously, a lot has changed on campus, including the Business School’s move to its new home in Grainger Hall. But, one thing that certainly hasn’t changed is the quality of the education. The grounding that I received here at UW in accounting, and in business generally, gave me a terrific foundation for my career, and I know the same will be true for the students today.[*]
Before I go further, I want to mention something that is not part of the biographical information Larry Rittenberg provided: I am a second generation UW accounting graduate. And, I should add, a second generation Beta Alpha Psi member. My father, Gerald Goelzer, got his accounting degree here in 1941. After a brief stint at the First Wisconsin Bank and a longer stint in the Army during World War II, he went into public accounting in Milwaukee with a firm known as Fontaine, McCurdy. That firm eventually morphed into the Milwaukee office of Arthur Young & Co. and then into Ernst & Young. While my dad left public accounting for private industry long before those changes, he loved auditing and, I think, regarded his days at Fontaine, McCurdy as the most rewarding and fun of his career.
My father passed away six years ago, but my mother, Roberta Goelzer, is very much alive and had hoped to be here tonight. She has, I think, spent the last 60 years hearing more about debits and credits, auditing standards, and spreadsheets -- and has spent more of her free time with accountants -- than I am sure she ever anticipated. My wife, Angela, is here, and she may feel that she is beginning to have some of the same involuntary immersion in the world of accounting. I would like to thank both of them for putting up with all of that and for their love and support.
I said a moment ago that I was pleased and honored to be named this year’s distinguished accounting alumnus. Perhaps surprised would have been a better word. In case you didn’t get it from Larry’s comments, I am primarily a lawyer who occasionally plays the role of an accountant. In particular, during the late 1960s, I worked in Milwaukee as an auditor at the CPA firm then called Touche, Ross, Bailey & Smart -- today’s Deloitte & Touche. If I had known then that I would eventually be involved in regulating the auditing profession, I certainly would have paid more attention to what I was doing back in those days!
I did learn a tremendous amount at Touche, and working there was a great post-graduate education in accounting. Of course, while some parts of that education were technical, others were more practical. In terms of the practical, the high point came one Saturday in 1969 when I was assigned to observe the physical inventory at Universal Foods -- now Sensient Technologies. Then, as now, one of the company’s operating units was Red Star Yeast. Those of you who live in Milwaukee, or who have driven through on the expressway, have probably noticed the pungent aroma emitted by Red Star. Observing the inventory meant that I had to climb up some rickety ladders and look into wooden vats to verify they did indeed contain the liquid that is the source of that smell. At least my boss told me that generally accepted auditing standards required me to climb those ladders -- I was never completely sure whether or not he was putting me on. In any event, I must have succeeded at this task, because I seemed to be on the way to specializing in it. The firm next assigned me to the audit of a cheese manufacturing company. For that one, I traveled around southern Wisconsin peering into vats of brine to count aging, and equally aromatic, wheels of cheese.
I won’t say that these experiences caused me to decide to go to law school, but they certainly didn’t cause me to change my mind about studying law. Soon thereafter, I entered the UW Law School and put my days at Touche behind me. I had already managed to pass the CPA exam and was eventually able to persuade the Wisconsin Accounting Licensing Board that my exploits at Touche, coupled with my subsequent work on the staff of the SEC, met the experience requirements. The Board issued me Wisconsin CPA certificate #5239 in 1977. It hangs on the wall of my office at the PCAOB today.
Despite my move into the legal realm, the decision to follow in my father’s footsteps and study accounting at the University of Wisconsin was probably the second best decision I ever made -- asking Angela to marry me was the best. Studying accounting gave me a solid grounding in the language of business and, I would say, also in logic and in the importance of precision and attention to detail in applying principles to concrete situations. The skills I picked up as a student and then as a practitioner have been invaluable in everything else I have undertaken professionally.
Of course, the accounting profession, and particularly auditors, have recently been through some rough years. Fairly or unfairly, confidence in public company financial reporting, and in the accounting profession itself, has been severely shaken. One of the oldest, most respected accounting firms in the country, Arthur Andersen, disappeared in a swirl of scandal. As a result of these things, Congress stepped in and, in the Sarbanes-Oxley Act, legislated on matters such as internal accounting control, auditor scope of services, CEO and CFO responsibility for financial statement accuracy, and a host of other topics that were once primarily the province of the profession and the business community.
At the same time, Congress ended the profession’s long tradition of self-regulation by creating the Public Company Accounting Oversight Board to oversee the auditors of public companies. The birth of the PCAOB in 2002 brought my career full circle by giving me the opportunity to return, so to speak, to my roots and to again become involved in auditing, this time as a regulator.
The past three years have certainly been among the most challenging, but also the most satisfying, of my professional life. I am required, whenever I speak publicly about the Board, to remind the audience that the views I express are solely my own and not necessarily those of the Board, its other members, or the staff. But, I don’t think there would really be much disagreement that the PCAOB has accomplished a lot in a short period of time. For example --
- We have gone from being a start-up, with no offices or staff in the Fall of 2002, to an organization with nine offices and nearly 400 people, many of them highly experienced and talented auditors.
- Roughly 1,500 accounting firms in 80 countries around the globe have registered with the Board. Our oversight responsibilities have become worldwide.
- We have inspected nearly 300 of those firms and are issuing inspection reports on an almost weekly basis. We are finding that, while there is always room for improvement, the vast majority of the people and firms in the profession are dedicated to and capable of the highest quality auditing. No one likes to have someone else look over their shoulder. However, I believe that the Board’s inspection program will prove to be a real asset to the profession.
- We have established ourselves as the standard-setter for public company audits and have issued some key new standards. In particular, we have adopted Auditing Standard No. 2 and given reality to the centerpiece of the Sarbanes-Oxley effort to restore public confidence in financial reporting -- the audit of internal accounting control. We also have several new standards in the pipeline. Possible topics include such critical matters as engagement quality review, communications with audit committees, fraud detection, and audit risk assessment.
It has been a privilege for me to be part of the launch of the PCAOB. The Board’s role in the work of the auditing profession is of course still an unfolding story. I believe, however, that we -- or more accurately, the profession itself -- have come a long way toward restoring and strengthening the public’s trust and confidence in financial reporting and in the work of the accountants who serve public companies. Our capital markets and therefore our economy are critically dependent on that trust and confidence, and it is something that we should all care deeply about. It is, I believe, one of the most challenging times, but also one of the best times, to be entering the accounting profession.
The point I would like to end with is that studying accounting here at Wisconsin almost 40 years ago turned out to open doors that I never anticipated. If I had simply studied political science or economics, gone on to law school, and then joined the staff of the SEC, I would probably never have had the opportunity to serve on the PCAOB. I think the same kind of thing is likely to be true for the students in the room tonight. It is impossible to know what twists and turns, ups and downs, your career is likely to take. However, I think you will find, as I have, that your education at the Business School -- and particularly in accounting -- will give you a good foundation to handle the challenges, and seize the opportunities, wherever you find yourself in the world of business and finance.
Thank you again for this honor and for inviting me to be here with you tonight.
[*] The views expressed herein are solely those of the author and are not necessarily those of the Public Company Accounting Oversight Board or any of its other members or staff.